{"id":3169,"date":"2022-03-29T14:36:55","date_gmt":"2022-03-29T12:36:55","guid":{"rendered":"https:\/\/magazine.lineapelle-fair.it\/?p=3169"},"modified":"2022-03-29T14:36:55","modified_gmt":"2022-03-29T12:36:55","slug":"the-latest-global-drama-and-the-horizons-it-does-not-paint","status":"publish","type":"post","link":"https:\/\/magazine.lineapelle-fair.it\/en\/focus-en\/the-latest-global-drama-and-the-horizons-it-does-not-paint\/","title":{"rendered":"The latest global drama and the horizons it does not paint"},"content":{"rendered":"

While the world, fashion, luxury and every productive sector were trying to get out of the pandemic emergency (which still bites), the war between Russia and Ukraine has triggered yet another global drama. The consequences of which are incalculable and unpredictable, for a series of reasons that we try (as far as possible) to put in order in this article <\/em><\/strong><\/p>\n

\u00a0<\/em><\/p>\n

The title sounds like a paradox. But it is the tragic reality of the latest global drama <\/strong>we are experiencing. Let us be clear. Any reflection, consideration, analysis that can be made on the war (because it is such, beyond any lexical distinction around which you want to discuss) involving Ukraine and Russia <\/strong>can only be incomplete and exhausting. What follows, which deals with the fashion system <\/strong>and its supply chain<\/strong>, cannot be less. But it is necessary. Because if for more than two years we have been in a battle against a pandemic that we could consider a “common enemy<\/strong>“, now a war has arrived. A real fight that has not only shattered the fragile horizons that each productive sector was trying to put back together. But it prevents new ones from being drawn<\/strong>. And all this is very problematic, risky and full of a thousand fears.<\/p>\n

The particular horizon, for now<\/strong><\/h3>\n

It is about sanctions against Russia<\/strong>. US President Joe Biden <\/strong>issued a trade blocking executive order on Friday 11 March. Subject: the US import <\/strong>of Russian products and the export <\/strong>of high-end goods to Moscow. The European Union <\/strong>followed suit on 15 March. Its list of banned products, consisting of almost 400 categories<\/strong>, also includes handbags, leather and fur clothing, coats, dresses, shoes, shirts and other articles of clothing. The value of exports <\/strong>affected by the decision to ban Moscow amounts to about $25 billion a year<\/strong>, according to Bloomberg’s calculations based on data from the International Trade Center.<\/p>\n

These measures follow one of the first forms of commercial boycott against Moscow, launched by many brands and labels. In other words, they are<\/strong> closing their shops in Russia<\/strong>. Many have done so, with more or more minor differentiated effects on their budgets. The social impact of this decision in Moscow and the surrounding area is incalculable, given the (very high) number of people who have been left without work. Hence without income.<\/p>\n

Horizons that cannot be drawn<\/strong><\/h3>\n

Although some people, playfully, have to try. Luxury and fashion analysts <\/strong>are trying to assess the direct and collateral effects <\/strong>of the war in Ukraine <\/strong>and Russia being isolated internationally<\/strong>. Results that can already be seen. Apart from the outcome of the conflict and the hoped-for immediate truce, much will depend on how long the sanctions last. For example, rising costs, supply chain challenges and the threat of super-inflation call into question the forecasts of fashion companies. The situation is so out of all logic of predictability that even China <\/strong>has said its economic growth will be slower than in past years. In the US, on the other hand<\/strong>, increased stock market volatility could dent consumer confidence. And, as a critical factor for luxury, the longed-for return of tourist shopping <\/strong>could be at risk.<\/p>\n

Small numbers<\/strong><\/h3>\n

Luca Solca <\/strong>of Bernstein estimates that, with sanctions in place indefinitely, demand for luxury goods will only <\/strong>grow by 1% in 2022<\/strong>. The boom in energy costs mixed with inflation will generally dampen global GDP growth. And the high-end could lose out on around \u20ac8 billion<\/strong>, or 2-3% less of its global turnover. Assuming the contagions return and do not go back up in the world.<\/p>\n

Beware of luxury<\/strong><\/h3>\n

It is not a threat but an awareness. The research department of the British bank Barclays is <\/strong>responsible for this. The critical scenario will not be so critical as long as “the problem” remains confined to the Russian market. Because in that context, “the brands generate on average 1-2% of sales, which becomes 2-3% if you include purchases by Russians abroad. The real blow to the market, however, would come from a “change in sentiment” in the luxury market in Europe and elsewhere. Rather self-evident, but there you have it: this is the reality<\/strong>. With the caveat, says Barclays, the brands would not give a damn about inflation either<\/strong>. They have already shown that their customers are so loyal (or addicted) to them, especially in China, that they swallow and digest the periodic and constant increases in receipts without too much political fuss. Ask Chanel for <\/strong>confirmation.<\/p>\n

The parallel counter-move (by Moscow)<\/strong><\/h3>\n

To close, we return to Moscow<\/a>. In a sort of necessary stockpiling frenzy in March, the footwear market reached record highs, along with its selling prices. We are talking about “consumer footwear”, domestic manufacture, not luxury goods that no longer come in from abroad. This is not a complete statement because Moscow is supposedly thinking of a counter-move. In other words, it is encouraging the parallel and grey market<\/a>, which is already quite flourishing in the area. Triangulations with multi-brand shops in neighbouring countries, called upon to supply Moscow retailers, could play an essential role in this mechanism.<\/p>\n

There is more. According to The Fashion Law, the Kremlin is considering “lifting restrictions on the use of the intellectual property for certain goods<\/strong>“. It is also considering decriminalising the crime of trademark infringement <\/strong>for goods whose circulation is restricted by sanctions. Therefore, the door is open to counterfeit and\/or dubious products, and Moscow could ignore any legal battles by Western brands. These, in turn, could refrain from starting them if they want to re-enter the Russian market in the future. But even this is an impossible horizon to draw today.<\/p>\n

Read also:<\/strong><\/p>\n